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Starwood is one of the world’s largest hotel and leisure companies. The group conducts its hotel and leisure business both directly and through its subsidiaries. The brand names include St. Regis® , The Luxury Collection®, Sheraton®, Westin®, W® and Four Points® by Sheraton. Through these brands, we are well represented in most major markets around the world. Our operations are grouped into two business segments, hotels and vacation ownership operations.
Our revenue and earnings are derived primarily from hotel operations, which include the operation of our owned hotels; management and other fees earned from hotels we manage pursuant to management contracts; and the receipt of franchise and other fees.
Our hotel business emphasizes the global operation of hotels and resorts primarily in the luxury and upscale segment of the lodging industry. We seek to acquire interests in, or management or franchise rights with respect to properties in this segment. At December 31, 2004, our hotel portfolio included owned, leased, managed and franchised hotels totaling 733 hotels with approximately 231,000 rooms in 80 countries, and is comprised of 140 hotels that we own or lease or in which Starwood has a majority equity interest, 283 hotels managed by us on behalf of third-party owners (including entities in which we have a minority equity interest) and 310 hotels for which we receive franchise fees.
Our revenues and earnings are also derived from the development, ownership and operation of vacation ownership resorts, marketing and selling VOIs in the resorts and providing financing to customers who purchase such interests. Generally these resorts are marketed under the brand names mentioned above. At December 31, 2004, we had 19 vacation ownership resorts in the United States and the Bahamas.
The Trust was organized in 1969, and the Corporation was incorporated in 1980, both under the laws of Maryland. Sheraton Hotels & Resorts and Westin Hotels & Resorts, Starwood’s largest brands, have been serving guests for more than 60 years. Starwood Vacation Ownership (and its predecessor, Vistana, Inc.) has been selling VOIs for more than 20 years.
Competitive Strengths
Management believes that the following factors contribute to our position as a leader in the lodging and vacation ownership industry and provide a foundation for the Company’s business strategy:
Brand Strength
Starwood has assumed a leadership position in markets worldwide based on our superior global distribution, coupled with strong brands and brand recognition. Our upscale and luxury brands continue to capture market share from competitors by aggressively cultivating new customers while maintaining loyalty among the world’s most active travelers. The strength of our brands is evidenced, in part, by the superior ratings received from our hotel guests and from industry publications. In 2004 we had more than 30 of our top hotels on the Condé Nast Traveler’s 2004 Readers Choice Awards List, including four hotels on their Top 100 Best Hotels in the World.” For the third year in a row we were named the World’s Leading Hotel Group” at the World Travel Awards.
Frequent Guest Program
Our loyalty program, Starwood Preferred Guest® (SPG) has over 22 million members and since its inception in 1999, has been awarded the Hotel Program of the Year six times by consumers via the prestigious Freddie Awards. SPG has also received awards for Best Customer Service, Best Web Site, Best Elite-Level Program, and Best Award Redemption. SPG, which was the first loyalty program in the hotel industry with a policy of no blackout dates and no capacity controls, enables members to redeem stays when they want and where they want. SPG yields repeat guest business due to rewarding frequent stays and purchasers of VOIs with points towards free hotel stays and other rewards, or airline miles with any of the participating 32 airline programs.
Significant Presence in Top Markets
Our luxury and upscale hotel and resort assets are well positioned throughout the world. These assets are primarily located in major cities and resort areas that management believes have historically demonstrated a strong breadth, depth and growing demand for luxury and upscale hotels and resorts, in which the supply of sites suitable for hotel development has been limited and in which development of such sites is relatively expensive.
Premier and Distinctive Properties
We control a distinguished and diversified group of hotel properties throughout the world, including the St. Regis in New York, New York; The Phoenician in Scottsdale, Arizona; the Hotel Gritti Palace in Venice, Italy; the St. Regis in Beijing, China; and the Westin Palace in Madrid, Spain. These are among the leading hotels in the industry and are at the forefront of providing the highest quality and service. Our properties are consistently recognized as the best of the best by readers of Condé Nast Traveler, who are among the world’s most sophisticated and discerning group of travelers. The November 2004 edition of the Condé Nast Traveler Magazine named four Starwood properties in the top 100 Best in the World”, with over 30 properties listed in the Readers’ Choice Awards list. In addition, the Condé Nast Traveler Magazine January 2005 issue included 51 Starwood properties among its prestigious Gold List and Gold List Reserve, more than any other hotel company.
Scale
As one of the largest hotel and leisure companies focusing on the luxury and upscale full-service lodging market, we have the scale to support its core marketing and reservation functions. We also believe that our scale will contribute to lowering our cost of operations through purchasing economies areas such as insurance, energy, telecommunications, technology, employee benefits, food and beverage, furniture, fixtures and equipment and operating supplies.
Diversification of Cash Flow and Assets
Management believes that the diversity of our brands, market segments served, revenue sources and geographic locations provides a broad base from which to enhance revenue and profits and to strengthen our global brands. This diversity limits our exposure to any particular lodging or vacation ownership asset, brand or geographic region.
While we focus on the luxury and upscale portion of the full-service lodging and vacation ownership markets, our brands cater to a diverse group of sub-markets within this market. For example, the St. Regis hotels cater to high-end hotel and resort clientele while Four Points by Sheraton hotels deliver extensive amenities and services at more affordable rates.
We derive our cash flow from multiple sources within our hotel and vacation ownership segments, including owned hotels activity and management and franchise fees, and is geographically diverse with operations around the world. The following tables reflect our hotel and vacation ownership properties by type of revenue source and geographical presence by major geographic area as of December
Number of: Properties – Rooms
Owned hotels(a): 140 – 50,000
Managed and unconsolidated joint venture hotels: 283 – 101,000
Franchised hotels: 310 – 80,000
Vacation ownership resorts: 19 – 5,000
Total properties: 752 – 236,000
(a) Includes wholly owned, majority owned and leased hotels.
Number of: Properties – Rooms
North America: 437 – 151,000
Europe, Africa and the Middle East: 175 – 43,000
Latin America: 46 – 10,000
Asia Pacific: 94 – 32,000
Total: 752 – 236,000
Theodore is the Co-Founder and Managing Editor of TravelDailyNews Media Network; his responsibilities include business development and planning for TravelDailyNews long-term opportunities.
